FactSet Research Systems (FDS) Discounted Despite AI Workflow Integration

FactSet Research Systems (FDS) Discounted Despite AI Workflow Integration

Mon, August 17, 2026 at 4:33 PM GMT+3 4 min read

• FDS -2.16%

Baron Capital, an investment management company, released its Q2 2026 letter for "Baron Partners Fund". A copy of the letter can be downloaded here. Baron Partners Fund reported a 16.61% (Institutional Shares) gain in Q2, outperforming both the Russell Midcap Growth Index (14.55%) and the Russell 3000 Index (15.44%). Year-to-date, it has returned 10.40%, exceeding the Russell Midcap Growth Index's 7.27%. Its one-year return is at 48.75%, significantly ahead of the Index (6.17%) and the Market Index (22.82%). The Fund has consistently outperformed the Index in 4 out of the last 5 years. With a focus on a concentrated portfolio, the Fund invests in 28 companies, primarily in the top 10 positions, which account for 74.1% of total investments. The median market capitalization of these companies is $20.9 billion. The strategy focuses on growth businesses expected to double in value within 5-6 years, utilizing proprietary research to ensure competitive advantages and sustainable growth opportunities, while employing leverage for enhanced returns and increased volatility. Additionally, reviewing the Fund's top five holdings could help identify its best picks for 2026.

In its Q2 2026 investor letter, Baron Partners Fund highlighted FactSet Research Systems Inc. (NYSE:FDS) a leading financial data company that provides integrated financial information and analytical applications for the investment community. FactSet Research Systems Inc. (NYSE:FDS) rose 6.34% in the quarter and contributed 0.31% to the Fund's performance. On August 14, 2026, FactSet Research Systems Inc. (NYSE:FDS) closed at $283.49 per share, reflecting a market capitalization of $10.08 billion. FactSet Research Systems Inc. (NYSE:FDS) posted a one‑month return of 10.83%, while its shares lost 23.62% over the past 52 weeks."

Baron Partners Fund stated the following regarding FactSet Research Systems Inc. (NYSE:FDS) in its Q2 2026 investor letter:

"FactSet Research Systems Inc. (NYSE:FDS) is a leading provider of financial data, analytics, and technology solutions to investment professionals globally. The shares came under pressure as investors continued to discount the business for perceived AI disruption risk. We believe the market significantly understates FactSet's positioning as AI becomes more deeply embedded in financial workflows, and in our view, FactSet is becoming critical AI infrastructure for the industry. FactSet has grown its organic annual subscription value 7% over the past year. CEO Sanoke Viswanathan noted on the most recent earnings call that momentum has continued. AI drove meaningful client expansions, with a top 10 bank doubling its data subscriptions. The company also announced a strategic partnership with Google Cloud to embed Gemini AI models into its workstation. FactSet now trades at a 52% discount to its 10-year average multiple and a 68% discount to its 5-year peak multiple. Management has repurchased $163 million in the most recent quarter.

This is not the first time the Fund has held investments that were temporarily out of favor while reinvesting in their businesses or navigating a period of investor skepticism. When the underlying issues are resolved, these stocks tend to perform exceptionally well. Diversification has served the Fund well during these stretches. The concentrated but categorically diversified structure of the portfolio allows the Fund to weather company-specific and sector specific headwinds with limited permanent capital impairment. The significant outperformance of our Disruptive Growth holdings in the quarter illustrates the benefits of this balance."

FactSet Research Systems Inc. (NYSE:FDS) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 39 hedge fund portfolios held FactSet Research Systems Inc. (NYSE:FDS) at the end of the first quarter, compared to 48 in the previous quarter. While we acknowledge the potential of FactSet Research Systems Inc. (NYSE:FDS) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on thebest short-term AI stock.

In another article, we covered FactSet Research Systems Inc. (NYSE:FDS) and shared a list of dividend stocks with low payout ratios and strong upside potential. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.